Business experts have predicted a significant boost for the West Midlands economy as it emerges from a period of "hibernation".
However, it was expected that the region's manufacturers could be in for a further tough time as they face up to high fuel costs, soft demand, and competition from the Far East.
The ITEM Club winter report - ITEM stands for Independent Treasury Economic Model - comes from Ernst & Young.
Organisers say it is the only economic forecasting group to use the HM Treasury's model.
The study suggested a modest recovery for the UK - although it also highlighted concerns over long-term stability.
The report nationally predicted growth of 2.3 per cent GDP in 2006, following "a dismal" 1.7 per cent growth rate in 2005.
It said the pick-up was hardly surprising given the strength in price of houses, equities and other assets.
Retailers also appeared to have had a much better Christmas than many predicted.
And Ronnie Bowker, senior partner in Ernst & Young's Birmingham office, said: "The ITEM Club report confirms that the West Midlands economy is showing small but significant signs of life after a prolonged period of hibernation, and if the predicted GDP growth of 2.3 per cent is reached, 2006 will be a far more prosperous year than the last. "
He said although there was a stronger performance from retailers over the Christmas period, consumer debt was at at its lowest growth rate for ten years.
That confirmed that shop-pers were keen to keep their wallets in their pockets.
He said: "With the high street still in for a tough time, the onus will be on the region's exporters to drive growth.
"Exports should hopefully be boosted by the recovery of major markets in Europe, particularly France and Germany.
"However, businesses from across the county will continue to feel pressure from high input costs."
He said a report by the Office of National Statistics recently revealed that factory gate prices charged by producers rose 2.4 per cent in the year to December.
Mr Bowker added: "And with exorbitant fuel and energy costs this is no surprise. West Midlands manufacturers are finding it increasing difficult to pass these costs on, and with increasing competition from the Far East and soft demand it could be a tough year ahead."
He said the stock market revival has had a positive effect on the region, with Tamworth-based Foseco and Center Parcs (UK) Group making successful market flotations.
With traditional businesses increasingly becoming more attractive to investors, the region may experience more stock exchange success stories.
Mr Bowker said: "As the ITEM Report predicts, the prospects for 2006 certainly look brighter, but with inflation back in line with the Bank of England's two per cent target I urge the Monetary Policy Committee (MPC) to consider a further interest rate cut to stimulate activity and to give manufacturers the helping hand they need."
The ITEM CLUB's forecast nationally said that the Consumer Price Index (CPI) has fallen back towards its target much earlier than anyone had dared hope, leaving the (MPC) free to cut interest rates if necessary.
However, a national ITEM Club spokesman said: "We are certainly not out of the woods yet."
"Growth is still well below par - just hitting the EuroZone average - and with consumer spending dropping and the pressure piling on exports to take up the slack, we could be in for a bumpy 2006."